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Child support payments and tax consequences

Child support often goes unpaid. In 2013, $22.5 billion was received out of a total of almost $33 billion owed around the country. A New Jersey parent who pays child support cannot deduct those amounts for federal income tax purposes, and child support is not considered taxable income for the recipient. It is normally the custodial parent who is permitted to take the dependent tax exemption even if the other parent supplies the bulk of the financial support for the child.

An exception can be made if the custodial parent agrees. The custodial parent must sign a written agreement stating that they will not claim the child as a dependent. The two parents must then sign an IRS form that is included with the tax return of the parent making the claim.

A different issue arises for parents who share custody. They cannot both claim the child on their tax returns, and the exemption cannot be split. One solution many parents use is agreeing to alternate the year in which they claim the child. This arrangement might be included in their overall parenting agreement.

State guidelines determine child support, but there are considerations such as a child's expenses and the lifestyle the child is accustomed to that affect what support will be. Parents can seek modifications of child support through the courts if they are unable to pay the amount originally agreed upon. They should do so as soon as possible when they realize they cannot afford the payments, and the assistance of an attorney may be advisable. It is not acceptable to simply stop paying, and they will be liable for the original amount until the order modification is issued.

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